BLBG: India’s Rupee Heads for Weekly Advance as Investments Increase
By Anil Varma
Dec. 19 (Bloomberg) -- India’s rupee headed for a third weekly advance on speculation U.S. interest rates as low as zero will encourage global investors to buy higher-yielding assets.
The currency touched the highest in 2 1/2 months yesterday after the U.S. Federal Reserve cut its benchmark interest rate to a record this week. Overseas investors bought more Indian shares than they sold since Dec. 1, heading for the first month of net purchases since April, data on average daily trading from the nation’s capital markets regulator showed. Eight of the 10 most- active Asian currencies outside Japan rose this week.
“I expect the rupee to strengthen from here as capital inflows are improving,” said Puneet Sharma, chief currency trader at state-owned Allahabad Bank in Mumbai. “The rupee has been reflecting the trend in stocks and may continue to do so.”
The rupee strengthened 3.1 percent this week to 47.04 per dollar as of 9:50 a.m. in Mumbai, according to data compiled by Bloomberg. That’s the best performance since the five days ended Nov. 7. It may rise as high as 46.75 in coming days, Sharma said.
The currency has rebounded by more than 7 percent from a record low of 50.615 reached on Dec. 2. The rupee’s 16.4 percent loss this year is the biggest since 1991.
Asian stocks rose this week after the Fed said Dec. 16 it will target a federal funds rate of between zero and 0.25 percent. The Reserve Bank of India’s benchmark lending rate is 6.5 percent.
The MSCI Asia Pacific Index of regional shares is up more than 9 percent in December, headed for its biggest monthly gain since June 1999. The last time the index ended a month higher was in April this year.
Funds based abroad bought Indian shares worth an average $35 million a day more than they sold this month, compared with net daily sales of $46 million and $186 million respectively in November and October, according to data released by the Securities and Exchange Board of India.
To contact the reporters on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.
